Tax Year-End Planning: Risks and Opportunities for Business Owners

If you are a business owner, there are important considerations to keep in mind when aiming to maximise your allowances before the tax year ends on 5 April 2026.

Recent and upcoming tax changes may impact your business and personal finances, so planning ahead is crucial. By reviewing your financial position and strategies now, you can make informed decisions that align with both your business objectives and personal financial goals.

Here are some key risks and opportunities to consider as the tax year draws to a close:

Make the most of your tax allowances and exemptions

Despite changes to pensions and inheritance tax, pensions are still a tax-efficient way for business owners to save for retirement. Using allowances like pension annual limits, ISAs, dividend allowances, R&D tax credits, and capital allowances is even more essential as taxes increase.

Understand the impact of the increase in minimum wage and employer NICs

Be aware of rising costs from higher minimum wage and employer NICs. Employer NICs have risen from 13.8% to 15%, with the threshold dropping from £9,100 to £5,000. The minimum wage is currently £12.21 for those aged 21 and over but from 1 April 2026, this will rise by 4.1%, increasing to £12.71 an hour. This is known as the national living wage. These changes could significantly impact business costs, so SME owners should assess their effect on staffing and pricing.

Be aware of changes to Business Relief (BR)

Starting in April 2026, 100% Business Relief will only be available on the first £1m of assets. Above this threshold, 50% Business Relief will apply. For businesses over this threshold, lifetime gifting may become an important strategy.

Reconsider your remuneration strategy

The last few years have seen a number of tax changes which potentially impact the most efficient means of drawing money from companies. This has changed again with an increase in Employer NICs. Seek advice from your accountant regarding your remuneration strategy.

Understand the impact of the Capital Gains Tax (CGT) changes

The main rates of CGT, for non-residential property, have increased from 10% and 20% to 18% and 24%. In addition, Business Asset Disposal Relief (BADR) rates increased to 14% in 2025 and will increase further to 18% in 2026. Where appropriate, advancing exits from a business may become attractive due to the CGT increases.

Reconsider your drawdown strategy

With pension funds becoming liable for inheritance tax from April 2027, drawing retirement income from pensions may become more attractive if you face IHT liability. Building a tax-efficient drawdown strategy is now crucial.

Many of these changes will increase the level of taxation for small business owners and this may mean fundamental changes need to be made to achieve your financial goals.

We can help you to put a plan in place or help you to bring your current plan back on track. Get in touch today.

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.

Although the content of the article was correct at the time of writing, the accuracy of the information should not be relied upon, as it may have been subject to subsequent tax, legislative or event changes.